New algorithmic stablecoins, like TerraClassicUSD (USTC) which de-pegged from the US dollar, would be prohibited for two years under a proposed bill in the United States House of Representatives.
Draft Bill would give 2 years to existing stabelcoins for modifications
According to a recent draft bill obtained by Bloomberg, the creation or issuance of new “endogenously collateralized stablecoins” would be illegal. However, the bill gives existing algorithmic stablecoin suppliers a two-year grace period to modify their algorithms and collateralize their offerings.
According to reports, the term would include stablecoins that are represented as having the ability to be converted, repurchased, or otherwise redeemed for a fixed price but instead rely on the value of some other virtual asset from the same founder to maintain their price.
The measure raises questions about whether stablecoins like Synthetix USD (SUSD), which is currently collateralized with the native asset of the same protocol in the SNX token, will be covered under the term. Similar-looking algo-stablecoins include BitUSD, which is backed by BitShares (BTS).
Additionally, according to the proposed legislation, the U.S. Treasury must conduct research on algorithmic stablecoins and consult with the Federal Reserve, the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
Bloomberg reports that people familiar with the bill say Democratic Representative Maxine Waters and Republican Patrick McHenry, the chair and ranking member, of the House Financial Services Committee, have been trying to reach an understanding on the legislation, though it’s unclear if McHenry approved the most recent proposal. It’s possible that the panel will vote on the bill as early as next week.
TerraClassicUSD (USTC), originally TerraUSD (UST), is an algorithmic stablecoin that lost its 1:1 peg with the U.S. dollar in early May, resulting in losses amounting to tens of billions of dollars.
Not only U.S., but several countries are tightening their stance toward regulating the crypto industry following UST collapse. In July, as TheCoinRise reported, the United Kingdom Treasury hinted at its plans for stablecoin regulation in a new bill.